Gold and Bitcoin Fall After CPI Data | Rate Hike Back on the Table

The release of three key US inflation indicators surprised the market, and gold and Bitcoin retreated in the initial reaction. Meanwhile, the dollar index and bond yields jumped, reinforcing concerns about further interest rate hikes.

World Economy - Daniyal Rahimi; The US Bureau of Labor Statistics report showed that consumer prices in September increased by 0.6% compared to the previous month; The figure was in line with market expectations.

However, the annual inflation reached 3.7% and was higher than the forecast of 3.6%.

In core inflation, which strips out food and energy fluctuations, the market had expected monthly price growth to ease to 0.2 percent, but the figure remained at 0.3 percent. Annual core inflation also reached 2.6%; higher than the expected 2.5%. In this way, three of the four main indicators of the report were recorded higher than the market forecast.

Which figures surprised the market?

Gasoline became more expensive in September by 9.1% and total energy by 5.2%. According to the BLS, gasoline alone explains more than half of the monthly increase in the overall index. Food overall did not change and was not the main driver of inflation this month.

In the core sector, housing costs increased by 0.4 percent. Used cars became more expensive by 0.7%, education by 0.6% and air fare by 1.2%. The share table of the components shows that energy has added about 0.38 percentage points and housing about 0.14 percentage points to the growth of the total index; Therefore, price pressure is not limited to energy.

Communications, which jumped the previous month, this time became 0.2% cheaper; But its reduction could not neutralize the increase of other core groups.

initial reaction; Gold and Bitcoin fall, yield increases

In the first minutes after the release, gold retreated from around 4152 to around 4115 dollars; A drop of nearly 37 dollars or 0.9% from the pre-news level.

Bitcoin also reached 82,836 Tether from around 8,3860 Tether in Binance trading and fell by nearly 1.2 percent.

In contrast, the dollar index jumped from around 102.20 to 102.67. The yield of ten-year bonds also increased from around 5.20 to 5.30%; About 11 basis units increase in initial response.

Will interest rates rise?

After the release of higher than expected inflation, the probability of interest rate increase of 25 basis points in the meeting of October 28, according to CME Fedwatch, reached 43.7% from about 22% before the news; Almost a double percentage point increase.

The probability of rate stabilization also decreased to 56.3 percent. So a pause is still the more likely market scenario, but the distance to a rate hike has narrowed considerably. Tomorrow's retail and producer inflation data could change those expectations again.